“While “Closeouts” could remain a 30bp drag (suspended MAP to clear inventory), we believe lower clearance at outlets should allow the DTC impact to GMs to improve from flat YOY in F2Q to the LT 30-40bp lift,” Binetti wrote in a note.

Looking ahead, the analyst expects Nike to reiterate FY2017 revenue outlook at low end of +HSD/LDD.

Importantly, the analyst believes initial FY2018 guidance will also point to the low end of the LT algorithm for +HSD/LDD revenue growth, driven by potential uptick in unit growth at factories, premium pricing and big DTC push.

Further, Binetti sees gross margins should expand by the first quarter, given lower markdowns, less FX pressure, and lapping of FY2017 gross margin accounting rebase.

Though Nike's $50 billion FY20 sales target may be off the table, the analyst wonders if the implied $7.8-$8.3 billion EBIT is still achievable.

The analyst also raised his price target to $67 from $61 as he believes Nike’s challenges are temporary and cleaner inventories in the full price channel should help reverse recent gross margin headwinds.

Moreover, Binetti still believes the company can deliver at least the low end of its +HSD/+LDD long-term revenue growth target.